Advanced Micro Devices

Investment Thesis

AMD’s MI300X is gaining traction in AI inference but market share gains against NVIDIA are slower than we initially modeled. The PC recovery provides a floor on valuation, but we see limited near-term upside catalysts. We maintain a Hold rating with a price target of $170.

What Changed

Data center GPU shipments missed consensus by a meaningful margin. While MI300X is shipping to real customers at real scale, the hyperscaler allocations are significantly smaller than what NVIDIA is capturing. The combination of CUDA lock-in and NVIDIA’s manufacturing allocation advantage is more durable than the market had hoped.

The ROCm software ecosystem has improved but closing the gap with CUDA is a multi-year project. Without software parity, AMD will continue to compete primarily on price — which limits its ability to expand gross margins as data center revenue grows.

PC and Gaming

The client PC business is recovering on the back of the AI PC transition. AMD’s Ryzen AI processors are competitive, and the upcoming Windows 12 cycle should drive enterprise refresh activity. This is a real positive but insufficient to move the needle on overall estimates.

Gaming remains soft. Semi-custom revenue from Xbox and PlayStation is declining as those console cycles mature, and no next-generation design win announcement is expected in the near term.

Path to Buy

An AMD upgrade would require either (1) clear evidence of a large hyperscaler committing to a multi-quarter MI300X deployment comparable to H100 volumes, or (2) a significant de-rating that makes the valuation compelling on a mid-cycle earnings basis.